The car loans that never end: borrower is still paying 27 years later, decades after car repossessed

by Jeff Sovern

Years ago, I heard the puppet Lambchop (Shari Lewis) sing The Song That Never Ends:

This is the song that never ends
Yes, it just goes on and on my friends.
Some people started singing it, not knowing what it was.
And they continue singing it forever just because,
This is the song that doesn’t end.

And then it repeats.  I was reminded of that song by Ryan Felton's Jalopnik article, The Car Loans That Never Die about loans like Richard Parker's 1991 subprime auto loan for $9,198.  It's been 27 years and he's still paying it off after he became too ill to work and so defaulted. The car was repossessed in 1994. Here's an excerpt from the article:

On April 22, 2005, the court again sided with the lender, ordering Parker to continue paying back a judgment that had by then grown to $27,315.

Credit Acceptance didn’t let up. In October 2012, it filed another request with the court to garnish Parker’s income taxes. At that point, he’d had $17,575.32 garnished—nearly double the amount of the original loan—but due to the interest costs accrued from the original judgment, records show, he still had $9,781.96 to go.

Actually, on second thought, it's not at all like a cute children's song.

 

The problems of getting and paying for credit for low-income people

That's the topic of this article by consumer reporter Michelle Singletary. It includes this hypothetical underscoring how the cost of credit can differ based on one's credit score:

Let’s look at a person taking out an auto loan who has a subprime credit score below 600 (on a scale of 300 to 850, the highest score being the best). He’s buying a $10,000 used car. The subprime borrower has a FICO credit score between 500 and 589, which qualifies him for an interest rate of 17.548 percent for the 48-month loan. He’ll pay a total of $3,987 in interest. Meanwhile, a prime borrower with a FICO score between 720 and 850 is offered a rate of 4.896 percent. Total interest paid: $1,031. [emphasis added]

Read this story about non-bank mortgage lending (which is more than half of the mortgage lending market)

Here.

Does an FTC commissioner click accept without reading? If practically no one reads these things, why do we hold people to them?

by Jeff Sovern

Regular readers of this blog know that I collect instances of people agreeing to contracts without reading them. Among my examples: Chief Justice Roberts, Judge Posner, Hillary Clinton, and consumer law professors. Now I think we can add FTC Commissioner Noah Phillips to the list, though his remarks are ambiguous enough that I can't be certain. During a July hearing before the House Commerce Committee, about 2:17 in, Commissioner Phillips said, as best I can transcribe it:

I hope in my own life and I hope that everyone in their own lives always make informed decisions. That's not always how we do things. I will admit to you I have repeatedly in the last few weeks clicked on any number of accept, accept, accept online.

It is possible that all Commissioner Phillips meant was that he clicked accept without reading carefully enough to make an informed decision.  But the way he said "accept, accept, accept" makes it sound as if he clicked "accept" without reading anything.  And I certainly don't criticize him for not reading, if indeed he did not. But if even an FTC commissioner charged with protecting consumers doesn't read these things, why do we pretend everyone does?

Free credit freezes and year-long fraud alerts

Starting today, consumers who are concerned about identity theft or data breaches can freeze their credit and place one-year fraud alerts for free.

The Federal Trade Commission explains, here.

American Airlines threatens to bar customers from changing tickets

American Airlines is threatening to prohibit customers from making changes to nonrefundable tickets if Congress makes good on a proposal to crack down on what critics call unreasonable airline fees.

The NYT article is here.

Dee Pridgen Seeks Co-Author for Consumer Law Treatises

Dee Pridgen is seeking a coauthor/collaborator for her two treatises published by Thomson Reuters, Consumer Protection and the Law and Consumer Credit and the Law.  These books have been updated yearly for 30 years and are available both in print and on Westlaw.  Her current coauthor, Richard Alderman, Professor Emeritus of the University of Houston Law Center, will no longer be available after the current update.  Note that these treatises are updated yearly, with a due date typically in early August.  Compensation would be through shared royalties or as agreed.  

She would prefer someone who is currently a law school academic professor with a good publication record, preferably in consumer law or related subjects.   However, she would consider anyone with excellent research and writing skills, relevant legal/academic experience, and a willingness to consider a long term commitment to this project.  

Please contact her at pridgen@uwyo.edu if you are interested in being considered.

The FAA and independent contractors (and the Supreme Court's upcoming decision in New Prime v. Oliveira)

Law prof Richard Frankel has written The Federal Arbitration Act and Independent Contractors, which takes up an issue before the Supreme Court in New Prime v. Oliveira. Here's the abstract of Frankel's article:

The misclassification of employees as independent contractors is one of the most serious problems affecting the American workforce. Wrongly labeling workers as independent contractors deprives them of important employee benefits, civil rights, and wage and hour protections. It deprives the federal and state governments of billions of dollars in tax revenue annually. While workers can seek redress in the courts, businesses are trying to take that right away as well by forcing workers to submit their disputes to binding mandatory arbitration under the Federal Arbitration Act (FAA). Section 1 of the FAA, however, creates an exemption for transportation workers, as it states “nothing herein contained shall apply to contracts of employment of seamen, railroad employees or any other class of workers engaged in interstate commerce.” 

This term, the Supreme Court is poised to decide whether businesses can evade this exemption by labeling their workers as independent contractors. In other words, it will consider whether the phrase “contracts of employment” is limited to contracts with workers who satisfy the legal definition of employee, or whether it was intended to apply to all transportation workers, including independent contractors. Although the Court’s recent history of consistently issuing pro-arbitration decisions may suggest that it is inclined to limit the exemption to employees, this essay argues that would be a mistake. The commonly-understood meaning of “contracts of employment” at the time of the FAA’s adoption in 1925, the Act’s legislative history, and policy concerns of preventing companies from intentionally mislabeling employees as independent contractors all favor interpreting Section 1 to apply to all transportation workers, regardless of their status. Such a result is both consistent with the FAA and can mitigate the ongoing exploitation of workers by their employers.

Read the Supreme Court briefs here. 

 

CFPB announces new CAB members; former members comment

by Jeff Sovern

The CFPB has announced the new members of its Consumer Advisory Board: the new board has fewer members than the old one--meaning fewer viewpoints are represented--and the members will serve for shorter terms, making it harder for them to accumulate relevant experience with board service. I wonder if this is just an attempt to comply with the letter of the statute rather than to have an entity that provides advice that is actually useful and followed.  Some of the former members commented on the CFPB action, and here is the first paragraph of the comment:

“We are disappointed that the current administration of the Consumer Financial Protection Bureau (CFPB) chose to only appoint nine members to this new CAB. While each of the individual members is qualified in her or his own right, the fact that there are so few of them means that Acting Director Mulvaney’s CAB lacks sufficient diversity and depth of perspective. There are only 2 consumer advocates, whereas there were at least 8 advocates on the former 25 member CAB. Ironically, there are no large financial institutions, major credit card providers, or debt collectors on this new CAB. While these sectors probably have other opportunities for access with the CFPB, one of the most valuable aspects of the recently disbanded CAB was that it provided a forum for fruitful and productive conversations among a variety of stakeholders in consumer finance, which often generated valuable insights for the Bureau and the CAB members. This will be missing from the new CAB. The lack of a multitude of perspectives is ironic given that a stated reason for disbanding the former CAB was to increase the diversity of viewpoints on the Board.

Trump Administration's Student Loan Policy

Student loan debt has jumped from $1 trillion to $1.5 trillion in the last 5 years. The Education Department's official default rates

voanews

seriously understate the share of young borrowers who default, or are not able to repay their loans. In the face of the growing student loan debt crisis, the Administration's corrupt policy is to undo the Obama administration's gainful employment rule for colleges, grease the wheels for fraudulent for-profit schools, curb loan relief to victims of school fraud, and sabotage consumer protection enforcement by the CFPB and state regulators (by asserting preemption) against student loan servicers who mislead and abuse borrowers. This article sums it up nicely.